About OFR Insight Sharing
OFR Insight Sharing is a new weekly program session presented by Old Fashion Research, joined by other crypto practitioners of multiple notable institutions and media presses. Every week, researchers of OFR Fund will share their research results in the crypto industry for the past week. Recaps take a look back at the sharing sessions and expose a larger audience to the most discussed topics recently.
This week, we are pleased to feature Luiz, the Founder and CEO of Dux, who shared his insights on Guilds, GameFi, and Web 3.0.
The Web 3
Internet 1.0 - Static Internet
The content is ready and finished. The user only views a page and does not interact, receiving information but not producing or sharing. They were the first pages of the internet. Web 1.0 was based on hyperlinks, with static sites and little interactivity.
Internet 2.0 - Dynamic Internet
A more participative internet, where user interacts with the content: comments, reactions, edit pages, creates profiles on social networks and posts content. Web 2.0 met the requirements of social networks, allowing users to interact with others and to produce their own content.
However, this content is still centralized by the platforms (Google, Youtube, Twitter). You depend on them (Challenge of migrating user bases between different networks, content and followers are not yours, they belong to the platform. And besides all, there’s all the manipulation, the monopoly and the information control policies by the Big Techs.
Ex. 1 Google ban on crypto ads;
Ex. 2 UN recommends ban on crypto advertising;
Sources https://www.thedailyencrypt.com/united-nations-states-bitcoin-ads-should-be-banned-and-crypto-wallets-to-be-regulated/ (2022)
https://decrypt.co/105013/un-developing-nations-bitcoin-ads-crypto-wallets (2022)
https://cointelegraph.com/news/google-to-ban-all-crypto-related-ads-starting-june-2018 (2018)
Internet 3.0 - Semantic Internet, Connective Internet or Decentralized Internet!?
There’s some indetermination around the Web3 Concept. There is still some uncertainty around the term, Web 3 is not ready or finished, but being built. So, there is no opposition between these terms, but complementarity.
Semantic Internet: refers to web pages that are meant to be read by both humans and machines, as some kind of second layer or dual interface, suggesting greater integration between human and programming languages, or between spoken language and algorithms, making it possible to analyze and process a much larger amount of data, in a much broader way. Organized semantically, online content will be much more personalized for each user.
Connective Internet: Also referred to by terms such as the Intelligent Web or Connective Intelligence, the idea suggests that new connection and interaction capabilities will allow machines to analyse and interpret a much greater volume of data, without the need to use large and complex operating systems to manage it, or to store the information, as everything will be done through cloud processing technologies. The Conective Web will allow users to interact in a deeper and more personalized way with each other through any platform or between platforms, with advantages such as being a much faster, secure and more efficient kind of connection than the current generation of the internet, suggesting the ability to combine the most different resources (like people, personal data, relationships, behavior, content, consumption and network) in a global real-time connection, creating value, meaning and purpose in a proportion that has been never seen before.
In Web3, machines will collaborate with humans more effectively, using technologies such as Artificial Intelligence (AI), Internet of Things (IoT) and Blockchain architecture to create a more equitable network by decentralizing the power. of the internet giants.
In the Decentralized Internet everyone is a content producer and consumer, browsers and servers at the same time. Users and Owners of profiles, Assets, Content and Platforms, who not only interact and participate, but create content that is theirs. Blockchain technology creates a safe, organized and intelligent environment, with reliable connections structured in a semantic way due to its personalization capacity. Those changes will give users much more power over the information they provide and consume, creating a free and more equitative internet.
In practice, Web 3 comes to life when the Network works as a whole, as if it were a unitary biological system. An intelligent but largely decentralized system that seems to organize itself without many people needing to know what is going on. The growth of telecommunications networks would be similar to the development of our nervous system. The exponential increase in Internet connections could be compared to the activity of a brain in the middle of the learning process, in the phase of maximum expansion of its capacities. Through the use of the Net, more connected minds, working towards the same goal, can bring about a form of intelligence that is superior to the sum of individual brains.
Data Opening: Web3 will allow users to access thousands of data centers around the world and to be able to choose who stores or distributes their data, and in what way (Amazon, Google and Microsoft currently lead the data storage market). The Movement of “Data Opening”, will offer more data security, sovereignty, scalability and privacy for users.
When you open Google or another browser and go to a website, you use the HTTP protocol, “telling” that protocol to look for a file at a specific location” (it’s as if, to find a book, you have to go to a specific library, and in case its closed, you can no longer access the content, as this is a centrally controlled structure. In Web3, each copy of the book will be compressed in a cryptographic algorithm that cannot be manipulated or corrupted. So , we could share it even without being connected to the network (in a P2P coonection).
Step back:
Web 1: Intended to be decentralized. Technical and Material difficulties made and Lack of Knowledge, with all the accessibility and usability issues, made the user experience still very difficult and underdeveloped, making room for Big Techs.
Web 2: Experience is dominated by big techs and large corporations. Example of Windows, a centralized Operational System. (Example of platforms that centralize the user experience, such as Google, Twitter, Youtube, Ifood, etc).
Web 3: Represents the challenge of decentralization. P2P relationship between consumers and producers, without so much intermediation of platforms and with the dispersion of intermediaries (we have the example of a content creator who sells his content directly to consumers, being charged with small fees for this and having control of the income, which is not all centralized on the platform, such as Twitch or Youtube, that are the only intermediaries responsible for collecting and distributing the resources, in this case.
The Web3 paradigm transcends the internet and interacts with social relations in human societies, reaching sociocultural, economic and political structures and reaching dynamics of international rights, sovereignty and the relationship between states (we have cryptocurrencies as an example).
After all, are we on web 3.0 or not??
Showcase example: • web1 - you look at the showcase window from the outside (information economy). • web2 - you expose your products in the showcase (platform economy). • web3 - you own the store, set up the window and choose what will be displayed in the showcase (ownership economy).
As we see it, we’re not at web3 or ready for it yet, but we already have web3 experiences in web2. The evolution of blogs, for social networks, and now for tools like brave, wikipedia and linux show as some examples of it.
Wikipedia: Users Post Content and Contribute to the ecosystem development by themselves.
Linux: Users share open source data and contribute to the system development for free.
Brave: Your Personal Data will not be collected and you won't receive ads, unless you authorize. Then, you will start seeing advertisements in your browser home page and earn BAT (Basic Attention Tokens) in your Brave Wallet, which later can be traded in an exchange.
(Basic Attention Token BAT): To Advertise in Brave Ecosystem, companies have to acquire BAT Tokens, moving the economy and contributing to the rewards paid to the users that see their ads.
Crypto appears as an incentive to build “opensource” communities or “Community as an Experience”. One of the features of Web3 is exactly the evolution of the concepts of digital economy and open economy, within economic systems based on the use of Tokens and governance structures that evolve in the form of DAOs. Web3 involves a change on the user base to the community behavior, from the client to the consumer who supports a project. He does not accompany, he is part and builds together.
Experiences that expand the physical world also bring up the problematic of digital ownership and digital identity (In Brazil we only have the INPI, the industrial property institute, there’s a big gap in this sense). And so, Disintermediation brings the aspect of decentralization of truth, trust and of the authority that validates certain information. The legitimacy of transactions is given by the technology and no longer by intermediary agents and institutions.
Guilds and GameFi - The evolution of the ecosystem
Guilds
In web2 Guilds, players owned their characters, items and assets, so what was most valuable was their time, commitment, knowledge and their skills. The Political element determined the Economic, in an informal market full of insecurity and deregulation. Gaming economies were closed off and sealed off the real world economy.
With open economy formats, in web3 Guilds the economic element gains relevance over the political. Because of the asset ownership conditions, either centralized by the guild or distributed among the players, guilds have to act like financial institutions, which end up having to become more formal organizations (such as companies) to deal with all relationships and transactions. involved with their activities. However, this is a complicated aspect that involves extremely complex regulatory frameworks, and as the market for digital gaming assets is consolidated on the blockchain, web3 offers alternative solutions. Now, it's possible to certify ownership, scarcity and originality of game assets by carrying out fast, cheap, reliable and secure p2p transactions without any intermediaries.
Thus, more than in the format of traditional and centralized companies (traditional legal entities), the most recent tendency for Guilds is to evolve into the format of DAOs. Fundamentally, DAOs could reduce frictions associated with the traditional legal framework and be a better alternative than traditional legal entities, because:
• Members change frequently: imagine the amount of paperwork involved! • Members want to stay pseudonymous, without any formal registration or vinculation. • Members are global: multiple jurisdictions mean leading with more legal, administrative, financial and banking complexities.
There are certain professionals that live with a very high risk and reward proportion: Gamers, Content Creators, Artists, Drug Dealers, Investors…
A DAO of gamers could be a perfect vehicle for these professionals to share risks while maintaining the same expected rewards. It’s no coincidence that the first generation of DAOs are investment DAOs. Entrepreneurship and investments are high risk high reward activities.
These DAOs would serve three primary functions:
• Curation: they scout for and admit high potential members. • Support: they provide support and services to each other. • Risk Sharing: they invest in new members in exchange for future financial upside. Members optionally share each other’s upside.
In this new kind of ecosystem, Tokens act as Tools to Coordinate Human Activities and Relations, and NFTs act as digitally native intellectual properties.
GameFi: We see GameFi as Gamified Finance or as the gamification of finance, in the sense that there is still more emphasis on the finance (Fi) aspect than on the “Game” or “Decentralization” components. Today we have more players than investors, we don't have people really committed to the sustentation, maturation and development of the ecosystem and with the popularization of these technologies and new organizational formats. We haven't had many real blockchain games yet, with assets (NFTs) that players really want to own, but only the gamification of various platforms and decentralized finance activities.
In this perspective, the Gamification of finance is applied as a way of increasing engagement and inducing users to certain types of strategies and behavior, leading them to desirable paths of action, motivating competition and cooperation or fostering the sense of overcome, conquer and reward, stimulating the adoption or shaping the use of these tools or platforms.
There are still not many projects that are already implemented and really concerned in developing “real high quality games”, or sustainable ecosystems for player interaction, something that will be necessary for the establishment of the sector.
However, even when they grow to become relatively autonomous entities or ecosystems, Games and Player Associations will have to get used to market movements, being directly related to it (and being perceived as investment assets). The economies of these games will no longer be alien to and shielded from the fluctuations of the global economy as a whole. Whenever crypto touches a new market, it turns its goods and products into investment assets and these new members and communities will have to learn to act as investors.
In any case, this process of finance gamefication is something that contributes to the movement of data opening and the role of microtransactions provided by the blockchain is preponderant for this (companies pay cents for each user who consumes their ads on a platform. It would be really hard to distribute fractions of all these small transactions back to users, like a profit redistribution scheme aimed at maintaining the platform sustainability and traffic, something that can now be resolved through these new technologies).
New Trends and the Future of the Market
At least 7 trends for market development in 2022/2023 can be verified:
- AAA Games
- Move to Earn
- Migration Web 2 > Web 3
- Competitiveness
- Metaverse
- Community
- Platforms
1. AAA Quality games (capable of captivating the public and conquering a community).
2. Move to Earn (Stepn, Genopets and many others)
3. Migration Web 2 > Web 3 (Castle Crush, League of Kingdoms, Mir4, Thetan Arena)
4. Competitiveness (Web3 esports and economic factor: mint x burn)
5. Metaverse (User-built interconnected virtual worlds, cooperation and neighborhood, with territory expanding and community building or ecosystem contribution as main goals and purposes)
6. Communities (Whenever crypto touches a new community, it is able to expand more and more. It happened with move to earn, when crypto and defi touched the fitness community and will happen again whenever a consolidated community is called to the decentralized digital economy by the gamification of some of its purposes, interactions, activities and goals).
**7. Platforms:
**- Gala Games, Wemix, Marbles, Sky Mavis (Ronin), Myria, Fractal, Wombat
- Other Platforms or specific Blockchain Networks like IMX or Ethereum Layer two’s
The long-term horizon:
In 2021, we had a lot of speculation, scams and bad projects being overvalued and overrated, with inexperienced players within the investment market and games with more investors than players, also fake communities and everything else. However, we believe that, from now on, the market crash and the so-called “winter” will “filter” the strongest projects, games, coins, guilds and DAOs.
Along with this, the evolution of technology, the optimization of prices, speed, security and scalability, the improvements in user experience (UX), the maturation of the market, the better planning of economies, the evolution of communities and the construction of the ecosystem should be a medium-term trend, capable of attracting new users and consolidating diverse new segments in this sector, possibly with more regulation and traditional gaming industries migrating or adapting to blockchain, with partnerships, financing, acquisitions, services providing and everything else.
AAA games, quality entertainment, players and investors committed to the ecosystems, bigger, more reliable, sustainable and secure digital economies, more liquidity, competitiveness, efficient burning mechanisms are all factors that may accelerate the whole process.
The evolution of Communities, Associations, Clans, Guilds and DAOs, with more education, knowledge and information, more conscious and committed users, better developed organizations, the accumulation of experiences of Guilds and DAOs, of the developers, of the members, of the technology and platform frameworks will be important components.
Finally, we would have several other new opportunities for Meta-Entrepreneurs in the most diverse fields, from art, wine, sports or real estate market to hotels, tourism, or titles and tickets (diplomas, certificates, official documentation, event passports or airline tickets).
Contributing data to earn or Attention and Proof of Atemption and Participation (POAP) to earn may also be another tendencies, so as a “Build Ecosystem to Earn” feature (under the WAGMI philosophy and the crowdfunding possibilities).
Games and Virtual Economy Assets may be the place where value is concentrated over the next decades. Virtual wallets are already the main form of payment in the world (larger than credit cards or physical money) and a large part of this movement is expected to migrate to technologies based on decentralized secure architecture environments such as Blockchain. Different projections estimate that this market will grow about 30 times over the next 10 years, not to mention the many other opportunities associated with this new reality.
Games appear as the new Social Networks, because it is there, connected on the internet or in the presence of these new interconnected virtual worlds, that people will be for a large part of their day, playing, interacting, connecting, relating, consuming information and entertainment, studying or working. More than that, the gamification of the most diverse aspects of social activity could revolutionize the way we understand the meaning, relationships and boundaries of concepts such as work and leisure or game and education, as broad categories and central spheres of social life.
Games could create powerful economic ecosystems capable of functioning in the most diverse ways, including the consolidation of formats and models of financial institutions with the possible emergence of a new model of free banking within powerful and deeply integrated communities. Many people together, believing in the same journey and jointly building the means to carry it out can be something very powerful.
Special thanks to Luiz, the Founder and CEO of Dux for presenting the content. Neither OFR Insight Sharing provides financial advice, nor researchers represent the final statement of OFR Fund.
ALL RIGHTS RESERVED TO Old Fashion Research
About Old Fashion Research
Old Fashion Research (OFR) is a multi-strategy blockchain investment fund founded in late 2021 by former executive and investment teams from the leading cryptocurrency exchange in the world. OFR adopts a multi-strategy approach to capture the underlying value of Web3.0 and to build a full-cycle ecosystem to support new-generation crypto native entrepreneurs. OFR incubates promising startups, follows up with traditional venture capital investment and scaling support, and finally supports the projects if they wish to exit through a merger or acquisition.